3. The physical act of recording something in a manifest document. After receiving written comments from the parties, the expert submitted his report, which was largely positive for the buyer. The seller contested the expert`s conclusions on the grounds that the report contained several obvious errors. Despite this dispute, the independent certifier issued the milestone certificates that followed the work performed by Amey and, under the contract, these certificates were final and binding on the parties. Only obvious fraud or errors would prevent certificates from being binding. It was clear to the Commission that the issuance of certificates was based on hypothetical data from the digital system and not on actual survey data. The applicant, Flowgroup PLC (Flowgroup), was the seller pursuant to an acquisition agreement relating to the allocated and issued share capital of Flow Energy Limited (`Target`), a gas and electricity company (`the acquisition agreement`). A dispute arises over the working capital adjustment to be made. The takeover agreement provided that such a dispute would be decided by expert decision. The parties retained Ms. Maggie Stilwell, a partner at Ernst & Young LLP (the expert), to resolve the dispute. The expert presented an expert opinion and a decision in favour of the buyer and defendant of the next action, Co-operative Energy Ltd (cooperative).

To challenge the decision, Flowgroup invoked the following exception, which appears in the expert clause of the takeover contract and which is a common feature of the expert clauses: “The written decision of the expert on the matters submitted to him is final and binding, unless there is a manifest error (in which case the expert`s written decision is addressed to the experts) or fraud.” 2 When negotiating settlement documents, less attention is often paid than they should to dispute resolution provisions. Even when these provisions are negotiated, the parties` concerns are often limited to how future disputes should be finally resolved (e.g. through judicial proceedings or arbitration), which law applies and, if so, what steps should be taken prior to the commencement of dispute settlement proceedings (e.g. whether negotiations or mediation should be mandatory prior to the commencement of judicial proceedings). Expert determination is a form of dispute resolution that is often overlooked in this context, although (a) it can be a quick and inexpensive dispute resolution procedure and (b) is appropriate if the subject matter is professional or technical in nature or if an assessment is required. Another key advantage is that an expert`s decision is difficult to challenge. English courts are reluctant to depart from what has been expressly agreed between the parties, including the form chosen and the dispute settlement procedure. This was underlined in a recent decision of the English High Court in the case of Flowgroup Plc v. Co-operative Energy Ltd.1: “The expert shall hear all disputes arising out of the provisions of paragraph 32, his competence to decide matters referred to him or his mandate. The expert`s written decision on the questions submitted to him shall be final and binding, unless there is a manifest error … Where an expert clause might be appropriate, the parties should anticipate the relevant legal, factual or technical issue(s), or a combination thereof, which they could ask an expert to identify and consider including them as much as possible in the transaction document. An expert determination clause could be used for certain specifically highlighted aspects of a settlement agreement in conjunction with an otherwise applicable arbitration or litigation provision.

Care must be taken to clarify the scope of each dispute settlement provision. Of course, the parties will ultimately determine the conditions for appointing the expert in the specifications; However, these negotiations are inevitably complicated if a dispute has already arisen. The Court did not agree that the correct approach necessarily affects the scope of the expert`s engagement. If, in accordance with the contract, the expert is asked to rule on questions of interpretation of the contract, there is no reason why a challenge should not circumvent the examination of the manifest error. Manifest error clauses are certainly a useful way to minimize the margin of contention over the calculations and numbers given, but they do not give carte blanche to the issuing party when it comes to paying attention to the accuracy of its calculations. Although they are generally enforceable (except in cases of fraud, bad faith or other special circumstances), it should also be noted, for the sake of completeness, that in situations to which the law applies (in particular standard terms or consumer contracts) they can always be challenged under the Unfair Contract Terms Act 1977. If, in the present case, the Council`s reasoning on the interpretation of the Treaty prevailed (which it did), everyone knew, when the independent certifier issued the relevant milestone certificates, that those certificates would be based on erroneous calculations. The Court decided that the certificates should be cancelled on the grounds of manifest errors.

They were based on information that the parties knew to be incorrect, rather than on accurate investigative data. Since there is only one correct interpretation of a contract, there must by definition be a manifest error when an expert misinterprets the contract and draws a conclusion based on such an error. Flowgroup`s second allegation was that any failure by the expert to interpret the sales contract correctly must constitute a “manifest error”, since under English law there is only one “correct” interpretation of a contract. This argument was also rejected by the Court. He argued that the correct approach depended in any case necessarily on the conditions and scope of the expert`s mission. If the expert has been mandated to rule on questions of contract interpretation, the Court considers that there should be no reason why an appeal against the expert`s decision should not satisfy the “manifest error” test set out above. The court considered a separate situation in which the expert had been ordered to make a decision in accordance with the established principles, but which, in the court`s view, had acted in accordance with the erroneous meaning of those principles. She said that in this scenario, the English courts could intervene in the expert`s decision if he had “exceeded the limits of [his] decision-making power”.

5 In both cases, however, the conditions and scope of the expert`s mission are decisive. A manifest and manifest error is necessary for any challenge based on an obvious error clause to succeed, but whether that simple and obvious error occurred is a question of fact and certificates need not clearly indicate that an error occurred. In this case, the error in the issuance of the certificates was discovered only when this contractual obligation was discovered. Some errors become apparent only when the court reaches a certain result on appeal. It may not be possible to prove “immediately and conclusively” that the errors were wrong, but they may still be obvious errors. The Court of Appeal ruled that Amey was contractually bound to update the file. The milestone certificates were therefore based on erroneous data that should have been updated. Applying IIGCapital and North Shore, the Court concluded that this error was so obvious that it could revoke the certificates for “manifest error” – although the error crystallized only in light of the Court`s judgment. “Manifest errors” clauses (sometimes referred to as “conclusive evidence clauses”) often appear in contracts where a decision, certification or finding (for example, the amount of a debt owing) must be made unilaterally by one of the parties and the parties wish to avoid any possibility of negotiation or dispute about that decision or decision. The judge agreed with the buyer`s lawyer that an obvious mistake must be more than just the wrong answer, it must be a “howler”.

The use of expert appraisal clauses also has disadvantages. In particular, an expert opinion is not enforceable in the same way as a court decision or an arbitral award, nor is it recognised or enforceable under international law. If a losing party does not comply, it may be necessary to bring a new action to enforce the expert`s decision. Depending on the jurisdiction, some of the additional costs and delays may be mitigated (in England, for example, a party may be able to expedite proceedings by invoking summary judgment under section 24 of the CPP). However, these questions of applicability may be particularly unattractive, especially if the dispute is likely to acquire an international character. For example, the following (or a variation thereof) is common in most loan agreements: “The certification or determination of an interest rate or amount by a financial party under a financial document, unless there is a clear error, is conclusive evidence of the matters to which it relates. The dispute between the parties over the application of the “manifest error” exception in the expert clause required consideration of both: the seller, Flowgroup, argued that the words referred to a “visibility test” that required that, in order to be a “manifest error”, the error be detectable on the front of the protocol (i.e. compared to the correct answer).